As we close out 2024, the lean hog (LH) market presents an intriguing mix of opportunities and challenges. With the latest market highlights pointing to steady fundamentals and mixed sentiment, stakeholders must carefully assess key indicators to navigate the path ahead. Below is an analysis of the current market landscape and key considerations for 2025.

Market Snapshot

Here are the key metrics as of December 31, 2024:

  • Final Cash Price: $78.31, within a range of $73.00 to $80.00.
  • CME Lean Hog Index: $84.35, down $0.30 from the previous session.
  • Pork Carcass Price: $94.32, with a 5-day average of $95.40, indicating room for recovery.
  • Weekly Slaughter Estimate: 2.362 million, including a Saturday slaughter estimate of 410K.

The market’s steady, mixed fundamentals and moderate volatility present a complex but navigable landscape.

Analysis of Fundamentals

The market’s current steadiness and mixed sentiment suggest no dominant directional bias. However, key price disparities—such as the current pork carcass price being below its 5-day average—highlight the potential for short-term recovery. Additionally, the CME Lean Index’s slight decline underscores the importance of monitoring near-term cash and futures market alignment.

Basis Consideration

The basis for February 2025 (HEG25) futures is $2.73 above cash prices, signaling a modest bullish sentiment. This observation may reflect underlying optimism in deferred contracts, particularly if demand conditions strengthen.

Volatility and Options Opportunities

  • Volatility: The market appears relatively calm, with a 14-day Average True Range (ATR) of $1.99 for February contracts. This low-volatility environment could influence hedging and speculative activities.
  • Options Activity: Significant activity around the $78 and $80 strikes suggests a range-bound short-term market. Observing these levels may provide insights into market sentiment and potential shifts.

Seasonal Trends

Seasonal demand often drives lean hog prices higher in spring. This historical trend should be a consideration when evaluating deferred contracts, particularly for April (HEJ25) or June (HEM25). These contracts exhibit more substantial pricing, with June futures settling at $99.70.

Key Technical Levels

For February 2025 futures (HEG25):

  • First Support: $80.90
  • First Resistance: $82.30

These levels serve as critical benchmarks for assessing market movements.

Risk Management Considerations

The Relative Strength Index (RSI) for February futures stands at 37.65%, approaching oversold territory. This metric suggests a cautious approach to market engagement, emphasizing mitigating downside risk while remaining positioned for potential upward movements.